the role of the state in an increasingly borderless world - Economic ...

Introduction
The collapse of Communism and its advocacy of central planning in the preceding
decade has been seen by many as the final triumph of capitalism. At the same time,
developments in Information and Communications Technology have reached critical levels,
enabling information to be processed and transmitted at a low cost on a large scale, with
profound effects on lifestyles and businesses. In the following years, the world has come to
resemble an integrated market, presenting us with an array of challenges. Chief among these is
the necessary re-evaluation of the role of the government.
Globalisation: Definition and Parameters
Globalisation is an integration of people, cultures and countries everywhere.
Economically, it represents the breakdown of traditional economic barriers—quantitative
controls, tariffs and national monopolies. People, capital, goods and ideas have greater mobility
than ever before.
The ICT revolution has catalysed this process. The Internet connects everyone with
access to a PC and a modem, essentially creating a global marketplace. Its ubiquity has
accelerated the process of knowledge diffusion, fuelling technological progress and enabling its
fruits to be enjoyed globally and almost immediately. The lowered cost of knowledge has
moved markets closer to the ideal model of perfect competition. Electronic mail, cell phone
technology and other communications breakthroughs have enabled firms to expand their
operations globally, where previously costly and inefficient communications processes limited
command and co-ordination links between headquarters and branches. The advent of
multinational corporations with interests spanning the globe has made the reversion to
isolationism extremely costly. ICT offers governments an unprecedented opportunity to
streamline bureaucracies, to eliminate red tape, and to better understand the circumstances of
their countries and constituents.
Expectations of the quality of governance will rise. With a better understanding of global
situations at the grassroots level, there will be an inevitable comparison between local and
foreign conditions. Price and wage differentials will become immediately obvious.
Governments who cannot meet citizens’ aspirations will find themselves looking at an exodus of
talent from their countries, or facing social unrest.
The economics of growth have been altered. Technology has improved the efficiency of
agriculture and manufacturing. However, as markets for primary and low-end secondary
products become fully exploited, this would also mean that these sectors would be shedding
employees. 1 In the global economy, the greatest profit is derived from knowledge—knowledge
of consumers’ needs, of how to fulfil those needs, and fulfilling them better and more cheaply
than your competitors.
Globalisation is more than an economic phenomenon. The shrinking of the world has
magnified problems like environmental degradation and the rich-poor divide. Countries face
ever-increasing intrusions on sovereignty, either through the expanded areas of jurisdiction of
international bodies like the World Trade Organisation or the surrender of prerogatives to
associations like the European Union. The ability of governments to influence the operation of
1 This is true even for tertiary sector products. In an article from its August 10 th issue this year, commenting on the
lacklustre performance of AOL Time Warner (New boss, same problems), The Economist quoted Peter Kriesky of
Kriesky Media Consultancy as saying, “When your market has begun to mature (referring to AOL’s one-size-fits-all
dialup service), you need to segment the market and develop a family of must-have services targeted to different
customer groups.”
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